Marco Rubio vs. Shareholders-Only Capitalism

[lpetrich]

Capitalism is failing America, says a conservative Republican - MarketWatch - Marco Rubio seems almost like Elizabeth Warren here.

His exhaustively researched report released last week, “American Investment in the 21st Century,” puts the blame squarely on institutional changes in corporate management and capital markets that demand a single-minded emphasis on short-term financial results over sustainable growth.

“Short-term economic growth does not guarantee a strong and prosperous nation, “ he says in an op-ed in the Washington Examiner.

Rubio argues that the prevailing business model of shareholder value — the idea that the only goal of a corporation is to return the maximum value to its owners — is ruining us.

The main task required of a successful economy, Rubio argues, is “developing productive, long-life capital assets.” In America, that task has always fallen upon the business sector, but American businesses aren’t even trying anymore.

And if the business sector can’t do it, Rubio warns, then it will fall upon the only other sector with the ability to do it — the federal government.

Or else create policy alternatives to shareholder-only capitalism.

Net investment by the nonfinancial business sector has collapsed since 2000. The companies that use to make the products and provide the services now look more like banks, with an increasing share of profits coming from financial assets. Ford went from a company that earned its money making cars to a company that earns its money making car loans.

Instead of taking savings from households and investing them in innovative or productive assets, the nonfinancial sector has become a net lender, turning the usual story about how our capital markets work on its head.

All part of the financialization of the economy, the increasing dominance of the financial sector. Evidently including nonfinancial businesses getting into finance.

“It should not be surprising then, that the U.S. private sector is in retreat from investment in basic science,” Rubio writes. “While large corporations historically invested in basic research as the precondition of value-creating innovation, this is decreasingly the case.” Nobody is doing today what Bell Labs did decades ago when it invented the science underpinning our modern electronics and communications systems.

R&D spending by companies is growing rapidly, but it is “increasingly weighted towards development rather than research, toward the marginal innovations related to the commercialization of old research than the longer-term pursuit of new discoveries,” Rubio says. Unfortunately, federal spending on basic research has also plunged.

Stuff with immediate returns rather than long-term stuff.

Third, “shareholder primacy theory has resulted in a diminished understanding of the role workers play and the risk they undertake in the value creation process,” Rubio says.

It’s assumed by the theory that “shareholders bear the risk, and therefore appropriately reap the reward of any profits,” Rubio says. “This obscures the reality that shareholders are not the only stakeholders in the value-creation process who take on risk.”

Like a risk of low job security, for instance.

 

[SimpleDon]

Capitalism is failing America, says a conservative Republican - MarketWatch - Marco Rubio seems almost like Elizabeth Warren here.

Or else create policy alternatives to shareholder-only capitalism.


All part of the financialization of the economy, the increasing dominance of the financial sector. Evidently including nonfinancial businesses getting into finance.

“It should not be surprising then, that the U.S. private sector is in retreat from investment in basic science,” Rubio writes. “While large corporations historically invested in basic research as the precondition of value-creating innovation, this is decreasingly the case.” Nobody is doing today what Bell Labs did decades ago when it invented the science underpinning our modern electronics and communications systems.

R&D spending by companies is growing rapidly, but it is “increasingly weighted towards development rather than research, toward the marginal innovations related to the commercialization of old research than the longer-term pursuit of new discoveries,” Rubio says. Unfortunately, federal spending on basic research has also plunged.

Stuff with immediate returns rather than long-term stuff.

Third, “shareholder primacy theory has resulted in a diminished understanding of the role workers play and the risk they undertake in the value creation process,” Rubio says.

It’s assumed by the theory that “shareholders bear the risk, and therefore appropriately reap the reward of any profits,” Rubio says. “This obscures the reality that shareholders are not the only stakeholders in the value-creation process who take on risk.”

Like a risk of low job security, for instance.

Rubio is right. One of the most destructive ideas from Milton Friedman's neoliberalism was that "the sole purpose of a corporation is to make profits for the shareholders." There is no reason for this, a corporation owes much more to its customers, its workers and to the society as a whole, in that order. It is the customers who provide the money that the corporation depends on for investment in new products and production facilities. It is the workers who provide the innovations and whose productivity increases provide the surest path to profits to guarantee their continued existence.

It is this single-minded quest for profits that has lead to outsourcing and off-shoring of jobs that has been responsible for much of the stagnation of middle-class wages and the growth of the extreme income and wealth inequality favoring the already rich. The massive amount of money that these corporate profits have put in the hands of the already rich has provided a boom in the stock market, along with the continuation of quantitative easing for no good reason beyond supporting the stock market. It has increased real estate values through the mechanism of REITs, real estate investment trusts.

 

[Sarpedon]

I wonder how long this Marco-fad will last.

Right or wrong, he'll slide away like an otter when Fox pushes back.

 

[James Brown]

Labor Unions and Countervailing Power

Since 1980—that is, the era in which labor unions were more or less powerless—the incomes of the rich have gone up nearly 200 percent. The incomes of the rest of us have gone up 15 percent.

This is, by a mile, the biggest reason that liberals should fight to restore the power of labor unions. Sure, unions help to raise wages. They bring more dignity to work. They support the middle class. But even if none of that were true, it would be enough that they are the only countervailing power sufficient to rein in the power of big business.

 

[Elixir]

Labor Unions and Countervailing Power

Since 1980—that is, the era in which labor unions were more or less powerless—the incomes of the rich have gone up nearly 200 percent. The incomes of the rest of us have gone up 15 percent.

This is, by a mile, the biggest reason that liberals should fight to restore the power of labor unions. Sure, unions help to raise wages. They bring more dignity to work. They support the middle class. But even if none of that were true, it would be enough that they are the only countervailing power sufficient to rein in the power of big business.

View attachment 21512

But look at the MASSIVE beatings the rich people took in 2000 and 2008, while those lucky low-earners went relatively unscathed!!
We should be taking up collections to help those poor rich people deal with the next crisis! Oh, wait... Trump just gave them another $2,000,000,000,000.00
Thanks Donald - saved us again!